It maybe time to partially book profits in equities

It's been a breathtaking rally for Indian equities, ever since investors sniffed a chance of the NDA forming the government at the centre in the General Elections. The sharp rally has largely been on hopes that Narendra Modi would take charge as the Prime Minister of India come May.

The Sensex which was at 20,200 points in early Feb is now at 22,628 points - a cool 10 per cent jump. Interestingly, there is a section of the market that has rallied sharper than that. You have Gujarat based company stocks, particularly the Adani group stocks that have seen a phenomenal rally. Along with this infra stocks and stocks from the PSU banking space have given returns of almost 30-50 per cent in the last two months. Capital goods and real estate stocks have also joined the bandwagon. Clearly, the situation now is similar to 2008, when even fundamentally weak stocks started rallying, only to collapse following the Lehman crisis.

While we may not have a crisis brewing the fact is that markets have run up too fast, without a reaction, thanks to a mad rush of foreign funds from Foreign Institutional Investors.

Analysts are now warning that there maybe profit booking as the markets look overstretched. Also, there could be capitulation in stocks, if the NDA does not get numbers that are closer to 230 seats.

The markets are known for their strategy to buy on rumors and sell on news. While Modi leading the nation may not be rumors, it's very much likely that the markets could react once the numbers are in place, as there could be profit booking.

So, it's best to at at least partially book profits if you have made the money.